By Robin Anson, managing director, Textiles Intelligence Limited, UK With Chinese exports once more restricted by quotas, buyers in the European Union and the United States are turning to the South Asian countries of Bangladesh , India , Pakistan and Sri Lanka to fill the gap. But with quotas in some cases likely to be in place until the end of 2008, buyers are questioning whether South Asian countries will be able to provide a suitable alternative to China in terms of quantity, product assortment, delivery times and quality.

In 2005, the European Union and the United States implemented comprehensive quota agreements aimed at limiting surges in textile and clothing imports from China. The surges followed the final elimination of global quotas at the end of 2004, after a ten-year phase-out process that started at the beginning of 1995.

FOCUS ON INDIA : HOW COMPETITIVE IS ITS TEXTILE AND CLOTHING INDUSTRY? Labour costs Hourly labour costs in India are among the lowest in the world. At only US$0.67 in 2004, they were significantly lower than competitors in the EU and US markets such as Taiwan (US$7.58), South Korea (US$7.10), Czech Republic (US$3.94), Turkey (US$2.88), Morocco (US$2.56), Mexico (US$2.19), Tunisia (US$2.05), Thailand (US$1.29), and the Philippines (US$1.12). They were also lower than in China 's coastal region (US$0.76). Admittedly they were higher than in Indonesia (US$0.55), inland China (US$0.48), Sri Lanka (US$0.46), Pakistan (US$0.37), Vietnam (US$0.28), and Bangladesh (US$0.28). However, such differences are easily overshadowed by differences in other costs and productivity levels. SWOT ANALYSIS FOR INDIA : STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS Strengths

India has an abundant domestic raw material supply. It is number three among the world's raw cotton producers, and is a significant manufacturer of manmade fibres.

It has a strong and diversified textile manufacturing base.

The country has a large domestic market as well as a large and rapidly growing consumer market, enabling its manufacturers to achieve economies of scale.

Labour costs are minimal.

India has a large and growing economy, and one which ranks as the world's number four in terms of purchasing power parity.

India has a vibrant capital market.

The country has a good strategic location, being close to the vast South Asian market.

India has a large pool of skilled manpower and one of the world's largest pools of professionals.

India has great potential to vastly increase its exports now that quotas have been eliminated.

With its low labour costs, India is well-placed to capitalize on the shift of production to Asia .

The imposition of safeguard quotas against China will provide India with more scope to expand its share in restricted (and unrestricted) categories.

The Indian domestic market provides opportunities for economies of scale.

World fibre consumption continues to increase.

India has the capabilities and infrastructure needed to capture a slice of the global expansion in technical textiles.

According to the ITMF, the Indian industry has a competitive advantage in raw material and labour cost in yarn and fabric manufacture.

Threats

India is at risk of being squeezed out of major markets by Chinese export growth.

Following the end of quotas, the major importing countries are likely to step up the use of non-tariff barriers by, for example, insisting that factories comply with environmental and labour standards.

An increase in anti-dumping and anti-subsidy measures is likely.

India could face growing competition from regional trade blocks and preferential trade deals which are designed to benefit other countries.

The dispute with Pakistan over Kashmir will limit the opportunities for intra-regional trade between the two countries and hence opportunities for production synergies.

Chinese government support to exporters makes India 's exports less competitive.

Falling prices in the quota-free era could hit margins.

INVESTMENT IN TEXTILE MACHINERY Shuttleless looms In the case of shuttleless weaving machinery—the more advanced technology than shuttle looms— India fares badly. With only 9,210 looms installed at the beginning of 2004, India was dwarfed by China 's 211,900 looms, Thailand 's 53,500 looms, Indonesia 's 29,000 looms and Turkey 's 18,000 looms. On the other hand, India acquired 8,586 looms during the ten years to 2004, which was almost as many as the number installed at the beginning of 2004. This demonstrates that almost all of its installed capacity is less than ten years old. Growth record in the EU market Figure 23 shows how India has been struggling to maintain growth in the face of competition from China , Turkey and Bangladesh . COMPETITIVE POSITION OF PAKISTAN Pakistan has a competitive industry with very low costs, a plentiful labour supply, and a plentiful raw material supply—including an indigenous supply of cotton and a vertically integrated industry. It has established good positions in developed country markets, and has benefited from government subsidies. In addition, it has received other government support and is favoured politically by the USA for its cooperation in the war on terrorism. However, in common with other countries in South Asia, it suffers from the problems which arise from being relatively distant from EU markets in comparison with countries in Eastern Europe and the Mediterranean Rim. COMPETITIVE POSITION OF BANGLADESH AND SRI LANKA Bangladesh and Sri Lanka developed as a result of their very low costs and quota-free and duty-free access to the EU market. Bangladesh also has an indigenous supply of raw cotton. Both have achieved a strong market position and Sri Lankan exporters have built up particularly good relationships with European and US buyers. But neither has special locational advantages and both suffer from a lack of backward linkages. As a result, lead times and costs are higher than those achieved by many of their competitors. And since the abolition of quotas, quota-free access has ceased to be a benefit. Extract from a conference paper presented at an Emap event on “Sourcing and Selling Fashion in India ”, in London